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It’s not a good time to do much right now, but experts say if you are looking for a new car — and feeling confident about your finances — it’s actually a great time to land a deal.
While car buying normally includes trips to a dealer’s lot, test drives and a mechanic’s second opinion on a used car, these are not normal times.
Shelter in place orders and social-distancing rules make it difficult to shop around a dealer’s show room, let alone hop in a car with a salesperson.
America’s economic uncertainty makes it even tougher for consumers to plan for a big-ticket purchase like a car: 26 million people have lost their jobs in the wake of the coronavirus outbreak, and one-quarter of Americans are bracing to lose their jobs as well.
“ New car sales were down 59% last week, year over year and used car sales were down 53%, according to one estimate. ”
Those are strong headwinds against buying any vehicle right now, new or used. New car sales were 59% lower last week than they were one year ago and used car sales were down 53%, according to Cox Automotive, the parent company of brands like Kelley Blue Book and Autotrader.
So anyone inclined to shop around should know car makers and dealers are motivated to sell — and it shows.
Car makers like GM GM, +1.99%, Hyundai HYMTF, -7.00%, Fiat Chrysler FCAU, +0.75% and others are offering highly attractive financing, as in, no interest paid for the life of the loan. (More on that, below.) Furthermore, many dealers and car-selling web platforms are trying to get customers as close as they can to the vehicles without face-to-face interaction.
“If you have the wherewithal to afford a new vehicle, there so many great deals,” said AAA Northeast spokesman Robert Sinclair.
So where are the deals?
Many companies are offering 0% financing, which means a buyer is only paying principal during the loan’s six or seven-year term.
For example, Chevrolet GM, +1.99% has 0% financing for 84 months, with one caveat, for “very well qualified buyers” on most 2019 models and 2020 Equinox, Silverado 1500 and Trax models. It will also let buyers defer monthly payments for four months. Buyers have to make the deal by the end of the month.
Fiat Chrysler Automobiles, the makers of Jeep, Dodge, Ram and others, also has a 0%, 84-month offer on certain 2019 and 2020 vehicles. “Chrysler Capital is the bank that determines if the consumer qualifies based on a variety of factors,” a spokesman said. The offer expires the end of the month.
Kia has a 0% for 75 months on certain models too, as well as Hyundai also has a no-interest 84-month offer and deferred payments for four months.
“Generally, to qualify for our long term 0% for 72 or 84 months you need to have above a 700 FICO FICO, -0.73% core. Current Hyundai owner loyalty benefits also apply,” a spokesman said. Buyers need to sign the contract by May 4.
J.D. Power, the consumer research and car ratings company, has a list of the car makers with financing offers here.
Don’t miss:The best cars of 2020
For perspective, new auto loan rates were between 5% and 6% as of the 2019’s fourth quarter, according to Federal Reserve data.
Karl Brauer, Kelley Blue Book’s executive publisher, told MarketWatch he’s never such a seen a wide variety of no-interest loans with deferred payments.
He’s seen 0% financing before, but it’s usually for one-off special offers. It’s also common to see to deferred payment deals, but Brauer is wary because interest can still accrue. But that’s not the case here either, he said.
“ The 0% interest offer means customers could avoid paying between $3,000 and $5,000 in interest, according to one estimate. ”
The 0% interest offer means customers could avoid paying between $3,000 and $5,000 in interest, he noted. That’s comparing the current offers to a theoretical sale on a car in the mid-$30s with a seven-year loan and 2%-4% interest, Brauer said.
Remember, the 0% financing isn’t open to everyone, and it’s still an offer on a pricier, more recent model. (The zero-interest offer terms aren’t negotiable, but the underlying dealer prices can be, car makers told MarketWatch.)
If buyers don’t qualify for the 0% offer or want to spend even less, Brauer said they can find some great deals in the leftover 2018 and 2019 models that a dealer will want to unload.
The “leftovers are really hard to sell when the brand new models have such aggressive deals,” he said. “The dealer should want to be able get rid of that car fairy aggressively.”
How can I buy a car without seeing it?
Car dealerships and auto repair operations are “essential workers,” according to U.S. Department of Homeland Security. That federal guidance helps states tailor their own decisions on who is and isn’t an essential worker that’s able to step out their door for work each day.
But even if many dealerships are open, many consumers can do a lot, if not all, of their shopping and research from home.
Kelley Blue Book and participating dealers will offer “video walkarounds” on vehicles and bring a car to a potential customer’s door for a test drive. Dealers selling vehicles via Cars.com also have virtual appointments and home deliveries available on certain vehicles. Carvana.com offers a “touchless delivery” on its vehicles right now.
It’s also worth just calling your nearby dealer to see what their own policy is regarding home delivery for test drives.
Always read car reviews and comparison tests to other similar cars, said Kelsey Mays, senior editor, consumer affairs and vehicle evaluations at Cars.com. “Reading comparisons tests are one of the best forms of content you can see on new car,” he said.
“ ‘Buying a used car sight unseen, it’s a bit of gamble.’ ”
A potential buyer shouldn’t spend more than 10% of their monthly budget on their car payment and all car costs, like insurance and gas, should only take up 15% to 20% of take-home pay, according the personal finance website Nerdwallet.
There’s the question whether to buy a pricier new car or a cheaper used car, which might have been handled and touched much more by its previous owner.
Sinclair said it’s always a wise idea to hire a mechanic to take a look at a used car. If you are comfortable with the idea, it could be easy to hire a mechanic. “They are not that busy right now,” Sinclair said.
“Buying a used car sight unseen, it’s a bit of gamble,” Mays said. One exception might be a certified pre-owned vehicle, which typically comes with a warranty attached. “A certified pre-owned [vehicle] allows you to save money while still getting a backstop that justifies not taking it to a mechanic.”
